One of the big questions for the employee ownership field is, why has the number of US employee-owned firms failed to grow significantly over the last couple of decades? An upcoming paper from Fifty by Fifty proposes that the barrier to growth is a lack of agency. Employees don’t have the knowledge, skills or capital to pursue a buyout of their employer; and employers, knowing little about the benefits of selling to employees, are more likely to respond to an opportunity that knocks on their door, such as an offer from a private equity firm or a strategic buyer. McDermott’s Ted Becker and Erin Turley share their thoughts on the guidelines in a recent article published on Medium. Access the full article. Originally published on Fifty by Fifty, January 29, 2020
Finally! First Circuit Overturns the Sun Capital ERISA Multiemployer Plan Liability Case—But Risks Remain for Private Equity
The First Circuit issued a decision holding that two private equity funds involved in a case are not required to pay for the withdrawal limit of a portfolio company. Despite the limited victory, the guiding rule with respect to defined benefit plan and multiemployer plan pension liabilities remains “buyer beware,” as applicable law continues to provide that such liabilities may become liabilities of private equity funds under certain circumstances. Access the full article.
Todd Solomon and Brian Tiemann presented on alternative investments for pension plans during the Association for Financial Professionals (AFP) Conference in Chicago. They discussed various rules benefit plan investors should consider, including the “look-through” rule and the “significant” investment rule. They also addressed common hedge fund structural and operational issues, and problems if a fund holds ERISA plan assets. View the full presentation.
Patrick McCurry and Todd Solomon wrote this bylined article on how family offices are using sophisticated techniques to compensate their employees in a tax-efficient manner. “We expect to see the continued use of equity to deliver tax-efficient compensation to family office employees while aligning the economic interests and incentives of the family and the family office’s key employees,” the authors wrote. Continue Reading. Originally published in Tax Executive, February 1, 2018.
Managers of private equity funds who are responsible for investing the assets of a fund that holds plan assets are likely to be considered a fiduciary under the Employee Retirement Income Security Act of 1974, as amended (ERISA). ERISA imposes numerous duties on fiduciaries, and those who fail to meet ERISA’s standards may be personally liable to restore plan losses, disgorge profits made through the use of plan assets, and pay additional statutory penalties imposed by the Department of Labor. The fiduciary may also face criminal penalties if found guilty of wilful failure. It is therefore vitally important that fiduciaries are fully aware of all their duties under ERISA. Read the full article.
Private equity firms risk potential liability for Worker Adjustment and Retraining Notification Act violations. Case examples demonstrate the need for proactive activity management, including observing corporate formalities, establishing and filling the director and officer positions of all entities, permitting the operating company management to make the decisions regarding employment terminations and plant closings, and clearly communicating and documenting these activities, to help avoid or quickly exit litigation. Click here to read the full article.